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Negotiation Special Report #1
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About Negotiation
The articles in this Special Report were previously published in Negotiation,
a monthly newsletter for leaders and business professionals in every field.
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James Sebenius
Harvard Business School
Guhan Subramanian
Harvard Law School and
Harvard Business School
Lawrence Susskind
Massachusetts Institute of Technology
three-Day seminars
the charles hotel
cambriDge, ma
Michael Wheeler
Harvard Business School
Guhan Subramanian
Joseph Flom Professor of Law and
Business, Harvard Law School
Douglas Weaver Professor of
Business Law, Harvard Business
School
Editor
Katherine Shonk
Art Director
Heather Derocher
negotiation
anD leaDershiP
Dealing with Difficult PeoPle
anD Problems
Published by
Program on Negotiation
Harvard Law School
Managing Director
Day 3: Put it all together and emerge well equipped to negotiate more skillfully,
confidently, and effectively.
Susan Hackley
Assistant Director
James Kerwin
Copyright 2012 by Harvard University.
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Colorado Rockies chose him as their seventh pick and then sweetened the pot
after Harrington, his parents, and his agent, Tommy Tanzer, rejected the teams
first offer. On behalf of his client, Tanzer turned down the Rockies final offer of
$4 million over two years, though it was a typical offer for a seventh-pick player.
After a disappointing season in the independent leagues, Harrington
entered the 2001 MLB draft, where the San Diego Padres made him the 58th
overall selection. On the advice of his new agent, Scott Boras, Harrington
rejected an offer of $1.25 million over four years and a $300,000 signing bonus.
In 2002, following another lackluster season in the independent leagues,
Harrington did poorly in the MLB draft and turned down less than $100,000
from the Tampa Bay Devil Rays.
In 2003, the Cincinnati Reds drafted Harrington in the 24th round and
offered him little more than the opportunity to play; again talks fell through.
In 2004, the New York Yankees drafted Harrington in the 36th round but
passed on making him an offer.
After failing to receive any offer in the 2005 draft, Harrington became a
free agent. In 2006, he received a minor-league contract from the Chicago Cubs,
but he was released before the 2007 season began. He continues to play for
independent-league teams, earning about $1,000 per month, and works other
jobs during the off-season.
Matt Harrington holds the dubious distinction of being the longest holdout
in the history of the MLB draft. His string of botched negotiations ensured that
his career ended before it could even begin.
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The mistakes Harrington and his negotiating team made are spectacular
as a whole, but considered one by one, they are not unique. In their book,
Judgment in Managerial Decision Making (Wiley, 7th ed., 2008), professors
Max H. Bazerman of Harvard Business School and Don A. Moore of Carnegie
Mellon University present Harringtons thwarted baseball career as
a cautionary tale to illustrate the decision-making errors that affect virtually
all negotiators.
In negotiation, we unwittingly operate under a number of systematic and
predictable cognitive biases on a regular basis. Many of these errors in thinking
result from our tendency to put too much trust in our intuition. Here we present
three of the most common mistakes that Bazerman and Moore have identified
and suggest a number of ways to keep this faulty thinking from ruining your most
important talks.
Mistake No. 1: Viewing negotiation as a fixed pie. Negotiators often falsely
assume that their interests are directly opposed to those of their counterparts.
The prevalence of competition in our society, ranging from sports to university
admissions to corporate promotion systems, can lead us to view many other
situations as win-lose. For example, too many negotiators assume that the pie of
resources is fixed in size when, in fact, opportunities exist to expand the pie by
creating value.
Whats more, researchers have found that the belief in a fixed pie causes
negotiators to devalue any concession their adversary makes. Unfortunately,
Matt Harrington and his agents succumbed to the tendency to view the other
sides alleged best offer with too much suspicion. They also neglected to explore
the possibility of a value-creating trade, such as accepting the salary offered and
negotiating performance-based bonuses if Harrington played as well as
he expected.
Solution: Share information. The simplest way to break through the fixedpie mindset in a negotiation is to disclose information to your counterpart.
In particular, try to provide information that could lead to wise tradeoffs. If a
customer complains about your prices, break down your costs for her and ask
whether she is willing to make concessions on delivery time or other issues
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in return for lower prices. Typically, the discoveries you reach jointly will
outweigh the risk that the other side will take advantage of the information
you disclose.
Mistake No. 2: Anchoring on the first offer. Harrington and his family fell
victim to another common cognitive bias: they were overly affected by the first
number that entered the negotiation. Harringtons first agent, Tommy Tanzer,
told MLB teams with high draft choices that Harrington would require at least
a $4.95 million rst-year signing bonusan unrealistic amount that scared off
seven teams in the draft. This high anchor created expectations in the minds of
Harrington and his family that could not be supported.
Initially, the Harringtons stood by Tanzers hard bargaining. Only later did
they come to understand that they had hired an inexperienced agentand file a
lawsuit against him for botching the deal.
Solution: Reject anchors. Unprepared negotiators are far more likely to fall
into traps, such as inappropriate anchors, than their prepared counterparts.
When you come to the table unprepared, you put yourself at a distinct dis
advantage. Set concrete goals for the negotiation in advance so you wont be
swayed by others influence tactics and vivid stories.
In addition, keep in mind that your thinking will tend to be more intuitive
and less rational when youre pressed to make snap decisions. Dont allow other
negotiators to force you to give an answer right away. Instead, schedule breaks
between negotiating sessions that give you time to think and evaluate.
Mistake No. 3: Escalating commitment. After wising up about Tanzer, why
did the Harringtons make the same mistake year after yearrejecting decent
offers in favor of much worse alternatives?
When Tanzer urged his 18-year-old client to turn down the Rockies
multimillion-dollar deal, he unwittingly set up his client for a string of failed
negotiations. According to Bazerman and Moore, negotiators have a tendency
toward irrational escalation of commitmenta strong psychological need to
justify their prior decisions and behaviors, both to themselves and to others.
After youve invested a great deal of time and energy in a course of action, its
difficult to know when to quit.
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the Big 12 stepped up financially to help keep the league united. Such
sacrifices demonstrate goodwill and team spirit.
4 Enlist new players. The shadowy group that worked to try to hold the
Big 12 together may have strongly influenced the final outcome. If your
counterparts wont listen to you, recruit outsiders they respect to argue
your case.
The Near-Collapse of the Big 12: Holding a Winning Team Together,
first published in the Negotiation newsletter (September 2010).
how me the money! That refrain from the 1996 movie Jerry Maguire,
shouted by a football player to his agent, continues to echo through U.S.
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U.S. team-sports leagues, including MLB, the National Football League, and the
National Basketball Association, players enter the system through a draft that
requires them to negotiate with one particular team. For most junior players,
holding out for a better deal means sitting out the seasonnot an appealing
career option. Only when athletes have served their team for a set number of
years are they eligible to become free agents and negotiate with other teams.
3. No zone of agreement. In negotiations outside the realm of sports, parties
typically see value in negotiating with each other only if a zone of possible
agreement, or ZOPA, exists. If youve decided to pay no more than $15,000 for a
new car, you wont bother visiting your local Porsche dealership.
Yet agents and sports teams often begin their negotiations miles apart.
Instead of dealing in the ZOPA, according to Wheeler, they deal in the
NOPAthe realm of no possible agreement. In a 1995 study, Wheeler and his
colleagues David Lax and James Sebenius tested this theory by observing how
actual National Hockey League (NHL) general managers behaved in a simulated
NHL salary negotiation. Almost all the pairs, playing the role of players agent
and general manager, started the negotiation with a large gap in their bargaining
range. That is, those acting as agents demanded much higher salaries for their
players than those playing managers were willing to offer.
In NOPA negotiations where the only alternative is to walk away (or, for
senior players in some sports, to let an arbitrator decide your fate), parties on
both sides of the table concentrate on getting the other party to budge, notes
Wheeler. Under these conditions, negotiation becomes nothing more than a
matter of hoping the other guy blinks first.
From competition to collaboration. If youve faced some of the same
challenges that plague sports negotiations, these four tips can help you strive for
greater collaboration and trust:
1. Manage your agent. In a chapter in Negotiating on Behalf of Others, Brian
S. Mandell argues that athletes who negotiate through agents need to take a
number of steps to guard against agent incompetence and conflicts of interest.
This advice applies to all negotiators who allow others to speak for them. First,
give your agent clear instructions regarding your long-term goals and your
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